Tourism Marketing - Tourism: Principles, Practices, Philosophies - page 424

visitor with a holistic combination of services, activities, and events from which he/she derives a high
level of satisfaction.
Unfortunately, because the experience chain involves such a diverse mix of services, activities, and
events, a great number of the links in the chain are outside of the control—or even the in uence—of
any single manager. Thus, it is important to develop management structures and processes that
can assist in coordinating and enhancing the quality of the various services, activities, and events of
the experience chain. It is here where the destination management organization (DMO) plays a
critical role.

Pricing

One of the most important marketing decisions is the pricing decision. Price determines how consumers
perceive the product and strongly affects other elements of the marketing mix.
Firms have a choice of three strategies in pricing their products. First, they may decide to sell their
product at the market price, which is the same price that everyone else charges. They then compete on
nonprice terms. Selling at a price equal to competitors tends to prevent price cutting and protect

margins, and customers are not driven away by price. However, because there is no price individuality,
there can be no price demand stimulation.
Second, firms may decide to price below the current market price. Firms that adopt such a discount
policy are trying to create the reputation of having the lowest prices and underselling all competitors.
To be successful, such firms must make sure that demand is elastic; otherwise, they will gain only at
the expense of their competitors and start a price war. This pricing strategy is more successful when it
is based on the elimination of services. Motel 6, for example, took its name from its original $6-a-night
charge and built its network on a no-frills philosophy. Today it is one of the top budget chains in the
United States.
The third approach is to charge above-market prices. Premium pricing strategy must be coupled
with the best service in the industry and other features and amenities to make this higher
price attractive. Such an approach emphasizes quality, which many consumers think is a function of
price; provides higher margins; generates more revenue for promotion; and makes better service
possible. However, premium pricing reduces vol-
ume, raises overhead costs, and encourages sub-
stitution. Nevertheless, numerous tourism rms
successfully use this approach, including the Ritz-
Carlton (winner of the U.S. Malcolm Baldrige
National Quality Award in 1992 and 1999), Fair-
mont, Hyatt, Marriott, and Westin hotels.
Some rmschoosetoemploytwoorthree
pricing strategies and develop a product to
appeal to consumers in each market segment.
The lodging industry began employing this strat-
egy in the last decade. Intercontinental, Choice,
Marriott, Hilton, Hyatt, and others have devel-
oped products to appeal to a broad range of
market segments. The tourism marketing man-
ager must consider 11 factors that in uence price
policies:

'

Southwest Airlines is well
known for its low airfares,
but it also has a reputation
for going out of its way to
deliver fun service to keep
customers happy. Photo
courtesyofSouthwest
Airlines.

1. The Internet. A key impact of the Internet is

that it has created transparency of pricing.
The widespread availability of information
and transparent pricing has increased